Small Business Employee Benefits and HR Blog

What is the Tax Treatment of FSAs (Flexible Spending Accounts)?

Employees contribute to FSAs through a salary reduction agreement. The employer may also contribute to an FSA if specified in the plan documents.

Tax on employee benefits through flexible spending account

All contributions are excluded from an employee’s gross income and wages subject to FICA (7.65%). Similarly, employers deduct reimbursements as a business expense and exclude them from wages subject to FUTA (0.8%) and the employer portion of FICA (7.65%).

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Disclaimer: The information provided on this website is general in nature and does not apply to any specific U.S. state except where noted. Health insurance regulations differ in each state. See a licensed agent for detailed information on your state. PeopleKeep, Inc., does not sell health insurance.